Background
Frigoscandia Logistics AB, FSL, was founded in 1997 as a Fourth Party Logistics provider,
4PL, with the purpose to supply temperature-controlled food and other goods to customers
world wide. The main purpose is to provide a complete logistics service package including
physical, administrative as well as financial flows. Moreover FSL takes the ownership of the
products, which is unique. FSL has taken over the responsibility of the whole supply chain
from the supplier to the customer, which results in a complex flow that requires efficient
control. FSL strives to be the number one logistic provider for the food industry and to
achieve this it is of most importance to balance stock levels while at the same time keep
... (More)

Background
Frigoscandia Logistics AB, FSL, was founded in 1997 as a Fourth Party Logistics provider,
4PL, with the purpose to supply temperature-controlled food and other goods to customers
world wide. The main purpose is to provide a complete logistics service package including
physical, administrative as well as financial flows. Moreover FSL takes the ownership of the
products, which is unique. FSL has taken over the responsibility of the whole supply chain
from the supplier to the customer, which results in a complex flow that requires efficient
control. FSL strives to be the number one logistic provider for the food industry and to
achieve this it is of most importance to balance stock levels while at the same time keep
predetermined requirements with regards to service level. The purpose of this master thesis is
to, on behalf of FSL, build a model for inventory control that dimensions safety stocks on the
basis of a given service level.
Problem analysis
FSL has chosen to determine optimal stock levels based on a certain service level, SERV2.
This is defined as the fraction of demand that can be satisfied immediately from stock on
hand. The problem to be investigated in this thesis is formulated as follow:
• Determine safety stocks and optimal stock levels on the basis of a given service level,
SERV2.
Purpose
The purpose of this master thesis is to develop a model for stock optimization that enables
FSL to determine their safety stock on the basis of a given service level. The model will make
it easier for FSL to optimize their stock levels and at the same time satisfy their customers.
Method
This study has a deductive approach since existing theories has been used as a starting point
during all investigations and interpretations. The authors believe that a comprehensive
understanding can only be achieved by objectively gathering data from the different parts.
This has caused the authors to choose a participant perspective. The authors have chosen to
use qualitative and quantitative methods of data congregation to generate solutions to the
problem at hand. Most part of the data has been collected through interviews. Other methods
that have been conducted in this study are literature studies and observations. Both primary
and secondary data has been used throughout the investigation.
Conclusion
The investigation shows that the forecast for majority of the items are generally too high. This
results in high stock levels since all purchase are done according to the forecast. The authors
think that the forecast model currently used at FSL is inadequate since it flattens down
seasonal variations and does not respond quickly to changes in demand. The authors suggest
that FSL considers alternative forecast methods. The authors believe that exponential
smoothing with trend would be a more suitable forecasting method to apply at FSL. In
addition a seasonal index, which takes seasonal variations into account, for each group of
items should be calculated.
Investigation reveals positive forecast errors, for the majority of the items, as a result of high
forecast. Although FSL believes that MAD is a good way to measure forecast errors, they do
not apply it in their work routines. FSL would gain better control of their forecast if they were
to measure and analyze the mean average deviation, MAD.
FSL uses traditional inventory classification which they call 1, 2, 3 classification. Class 1
defines articles with 99 percent service level requirement and consists of high volume items.
Typically class 1 contains 10 percent of the items. At FSL they make up for 36 percent of the
stock which could make it complicated for FSL to differentiate the resources.
When placing orders neither the total costs, holding and ordering costs, nor the service level
requirements are taken into consideration. The designed model takes both parameters into
account and is therefore suitable as a complement to existing systems, as well as a support for
supply planners in their work. The model also allows changes in parameters such as service
level, lead-time, holding costs and ordering costs. All these parameters have an impact on the
calculated safety stock. When using the model, results show that current safety stock levels
can be decreased for the majority of the articles. The investigation also reveals that current
safety stock levels are similar to safety stock levels calculated by the model.
If the total holding costs and ordering costs are taken into consideration when placing orders,
FSL will be able to reduce capital tied up in inventory and the resources can better be divided
by also considering the predetermined service level requirements. This will result in more cost
efficient stock control which in turn enables FSL to better serve their customers. (Less)

@misc{1979257,
abstract = {Background
Frigoscandia Logistics AB, FSL, was founded in 1997 as a Fourth Party Logistics provider,
4PL, with the purpose to supply temperature-controlled food and other goods to customers
world wide. The main purpose is to provide a complete logistics service package including
physical, administrative as well as financial flows. Moreover FSL takes the ownership of the
products, which is unique. FSL has taken over the responsibility of the whole supply chain
from the supplier to the customer, which results in a complex flow that requires efficient
control. FSL strives to be the number one logistic provider for the food industry and to
achieve this it is of most importance to balance stock levels while at the same time keep
predetermined requirements with regards to service level. The purpose of this master thesis is
to, on behalf of FSL, build a model for inventory control that dimensions safety stocks on the
basis of a given service level.
Problem analysis
FSL has chosen to determine optimal stock levels based on a certain service level, SERV2.
This is defined as the fraction of demand that can be satisfied immediately from stock on
hand. The problem to be investigated in this thesis is formulated as follow:
• Determine safety stocks and optimal stock levels on the basis of a given service level,
SERV2.
Purpose
The purpose of this master thesis is to develop a model for stock optimization that enables
FSL to determine their safety stock on the basis of a given service level. The model will make
it easier for FSL to optimize their stock levels and at the same time satisfy their customers.
Method
This study has a deductive approach since existing theories has been used as a starting point
during all investigations and interpretations. The authors believe that a comprehensive
understanding can only be achieved by objectively gathering data from the different parts.
This has caused the authors to choose a participant perspective. The authors have chosen to
use qualitative and quantitative methods of data congregation to generate solutions to the
problem at hand. Most part of the data has been collected through interviews. Other methods
that have been conducted in this study are literature studies and observations. Both primary
and secondary data has been used throughout the investigation.
Conclusion
The investigation shows that the forecast for majority of the items are generally too high. This
results in high stock levels since all purchase are done according to the forecast. The authors
think that the forecast model currently used at FSL is inadequate since it flattens down
seasonal variations and does not respond quickly to changes in demand. The authors suggest
that FSL considers alternative forecast methods. The authors believe that exponential
smoothing with trend would be a more suitable forecasting method to apply at FSL. In
addition a seasonal index, which takes seasonal variations into account, for each group of
items should be calculated.
Investigation reveals positive forecast errors, for the majority of the items, as a result of high
forecast. Although FSL believes that MAD is a good way to measure forecast errors, they do
not apply it in their work routines. FSL would gain better control of their forecast if they were
to measure and analyze the mean average deviation, MAD.
FSL uses traditional inventory classification which they call 1, 2, 3 classification. Class 1
defines articles with 99 percent service level requirement and consists of high volume items.
Typically class 1 contains 10 percent of the items. At FSL they make up for 36 percent of the
stock which could make it complicated for FSL to differentiate the resources.
When placing orders neither the total costs, holding and ordering costs, nor the service level
requirements are taken into consideration. The designed model takes both parameters into
account and is therefore suitable as a complement to existing systems, as well as a support for
supply planners in their work. The model also allows changes in parameters such as service
level, lead-time, holding costs and ordering costs. All these parameters have an impact on the
calculated safety stock. When using the model, results show that current safety stock levels
can be decreased for the majority of the articles. The investigation also reveals that current
safety stock levels are similar to safety stock levels calculated by the model.
If the total holding costs and ordering costs are taken into consideration when placing orders,
FSL will be able to reduce capital tied up in inventory and the resources can better be divided
by also considering the predetermined service level requirements. This will result in more cost
efficient stock control which in turn enables FSL to better serve their customers.},
author = {Evaldsson, Sandra and Nokrach, Britta},
keyword = {Service level,inventory control,purchase,stock optimization,safety stock,stock level},
language = {swe},
note = {Student Paper},
title = {Lagerstyrning av inköpsartiklar på FSL – Dimensionering av säkerhetslager utifrån given servicenivå},
year = {2008},
}